Services – Consumer Protection Act

Written by: Shuchi Mishra - I
am a 5th year law student from Symbiosis Law School, Pune. I am
dedicated and hardworking student and amongst top 10 students in my
college. I love to participate in extra curricular activities like-
college committee, seminars, essay writing competitions and sports
like swimming. I want to become a great lawyer one day and make my
parents, college and country proud of myself.

Consumer is the purpose and most powerful motivating force of production,
yet at the same time consumer is equally vulnerable segment of the whole
marketing system. Attempts have been made to guard the interest of the
consumer. In 1986, Government of India enacted a comprehensive
legislation-Consumer Protection Act, to safe guard the interest of the
consumer. The Consumer Protection Act, 1986, applies to all goods and
services, excluding goods for resale or for commercial purpose and
services rendered free of charge and under a contract for personal
service. The provisions of the Act are compensatory in nature. It covers
public, private, joint and cooperative sectors.

The Act enshrines the rights of the consumer such as right to safety,
right to be informed, right to be heard, and right to choose, right to
seek redressal and right to consumer education.

All of us are consumers of goods and services. For the purpose of the
Consumer Protection Act, the word "consumer" has been defined separately
for "goods" and "services".

For the purpose of "goods", a consumer means a person belonging to the
following categories:
(i) One who buys or agrees to buy any goods for a consideration which has
been paid or promised or partly paid and partly promised or under any
system of deferred payment

(ii) It includes any user of such goods other than the person who actually
buys goods and such use is made with the approval of the purchaser.
EXCEPTION- A person is not a consumer if he purchases goods for commercial
or resale purposes. However, the word "commercial" does not include use by
consumer of goods bought and used by him exclusively for the purpose of
earning his livelihood, by means of self employment.

For the purpose of "services", a "consumer" means a person belonging to
the following categories:
(i) One who hires or avails of any service or services for a consideration
which has been paid or promised or partly paid and partly promised or
under any system of deferred payment.

(ii) It includes any beneficiary of such service other than the one who
actually hires or avails of the service for consideration and such
services are availed with the approval of such person.

Characteristics of Services-
(i) Two party process –
there has to be a service provider and service recipient.
(ii) It has to be intangible and invisible, i.e., it cannot be seen or
touched.
Exception- Report of Consultant on a diskette is visible.
(iii) It has to be for consideration.- according to the Indian Contract
Act , a contract without consideration is void. A party giving something
has to get something in return. It includes- granting, assignment, or
surrender of any right. It should not be free. If it is for free, no
service tax can be levied.
(iv) Merely may be made available, actual utilization not necessary. If
made available, it would be considered as service. It is not mandatory for
the other party to use it.
(v) It cannot be a personal service.
(vi) ‘Contract of service’ and ‘ Contract for service’-

Contract of service- employee can be turned out at any time without any
specific reason. He is under direction and control of employer. Here
master can direct what and how to be done.

Contract for Service- master can direct only what and not how. Example-
Accountants, Lawyers, Surgeons, Builders.

(vii) Manner of Service- by rendering( doctor) , by performing( mechanic)
, by providing, by delivering( courier).
(viii) Service is a process. It cannot be stored or transferred. However
there can be pre storage ( refill cards), or post stored ( music disk).
(ix) Nature of Service Tax- one point transaction.
(x) Aspects covered- (i) activity/ performance( employment, professional,
marketing)
(ii) resources (leasing, financing, renting)
(iii) risk ( insurance)- it is not a personal service.
(iv) Skill (Consulting)
(xi) It can be any act resulting in promoting interest or happiness-
contractual, legal, statutory, domestic, public etc.

Contract of service and Contract for service- difference:

In both the contract of service and contract for service there is transfer
of property in goods but the difference is of degrees i.e. “dominant” or
“incident”.
In a contract of service the employer normally enjoys the power of control
over the work of the servant and the servant is bound to obey the
orders/instructions of the master. The employer’s right to reject the end
product, if it does not conform to the instructions of the employer,
speaks for the element of control and supervision. So also the right of
removal of the workmen or not to give the work has the element of control
and supervision. The right of rejection coupled with the right to refuse
work would certainly establish “master-servant relationship”.

There should
be:
(i) Employer-Employee relationship.
(ii) Usually a continuous relationship.
(iii) A duty of care owed to employees, and
(iv) The employer is generally liable for the vicarious acts of
employees .
(v) Wages/Salary payment method.
(vi) Subject of contract is to carry on continuous work.

In a contract for service, on the other hand, an independent contractor,
undertakes to produce the required result, but in the actual execution of
the job to produce the result, he is not under the order or control of the
person for whom he executes that work. He is free to use his discretion. A
contractor has been defined as a person who, in the pursuit of an
independent business, undertakes to do specific jobs of work for other
persons without submitting himself to their control in respect of the
details of the works and jobs.

There should be:
(i) Employer-Independent
Contractor relationship
(ii) A relationship organised around the completion of a once-off piece of
work.
(iii) A duty of care, arising from occupiers’ liability.
(iv) The employer is generally not liable for the vicarious acts of
independent contractors.
(v) In general, protective legislation does not apply, except for the
Safety, Health and Welfare at Work Act, 1989 and the Equality Act.
(vi) Various methods of payment, including lump sum per job.
(vii) Subject of contract is once-off job

Case- The Supreme Court in the case of Shining Tailors v. Industrial
Tribunal II, U.P, it was held that tailors working on piece-rate basis in
a big tailoring establishment are workmen of the owner of the
establishment. Every piece-rated workman is not an independent contractor,
piece-rate payment meant, payment correlated to production. It is a
well-known mode of payment to industrial workmen. ( contract of service).

In Achutha Achar v. Sharada Jewellery Mart, (1968) 1 LLJ 500 (Mys), it was
held that goldsmiths were engaged by a gold merchant for manufacturing
jewels for him, where such goldsmiths were asked to finish jewels within a
given time or earlier and engage themselves in other works, it has been
held that it was a contract for service and the goldsmiths were
independent contractors. ( contract for service).

Service by rendering- Doctors:

Doctors come under the purview of Consumer Protection Act. A landmark
judgement in this regard was by the State Commission of Orissa in Smt.
Sukanti Behera v. Dr. sashi Bhushan Rath, where it was held that the
patients have a right to challenge the quality of health care services.

In Indian Medical Association v. V.P. Santh (1995) , it was held that
medical services come under the purview of Consumer Protection Act.

Nature of Service Tax-

Service tax is an indirect tax levied under the Finance Act, 1994, as
amended from time to time, on specified services. At present, there are
approximately 96 categories (including 15 new services introduced by
Budget 2006) of services taxable under the service tax net. It is levied
at a uniform rate of 12.24%.

The new services made taxable include services provided by share transfer
agents and registrar to issues, recovery agents, maintenance and
management of Automatic Teller Machines, sale of advertising space or time
(except for print media), sponsorship of events by companies (except for
sports), public relations management services, ship management services,
international air travel (excluding economy class), rail container
handling services (excluding haulage charges), cruise ship travel,
Internet telephony services, business support services, auctioneers’
service (excluding auction of property under directions or orders of a
court of law or auction by the government) and credit card, debit card and
other payment card-related services.

The value of service generally liable to service tax is the gross amount
charged by the service provider for service rendered. Out of pocket
expenses such as (travel, lodging, etc) paid on behalf of the client and
recovered on actual basis (supported by documentary evidence) have been
clarified for certain services as not being liable to service tax.

Conclusion-
The rights of consumers needs to be protected since they avail services
given by the service providers based on trust and faith and thus it’s a
necessity to keep a check on the service providers for the sake of service
recipient.